UC Davis

In this dissertation, I analyze the economic effects of weather, climate change, adaptation, and natural resource scarcity through the lens of agriculture in California. Quality is central to much of agriculture because of its role in price determination and contractual arrangements. Nevertheless, prior work on the effect of weather and climate change on agricultural production mostly focuses on staple crop yields. Ignoring quality will likely bias estimates of the impact of weather and climate change on productivity and farm income. In the first essay, we quantify the effect of temperature exposure and climate change on the revenue of specialty crop growers through two pathways: quality and yield. In contrast to earlier work on irrigated crops, we find extreme temperatures negatively affect both yield and quality leading to reduced grower revenue in a setting where irrigation is the norm. While the yield effect dominates, failing to account for quality significantly underestimates the true effect of temperature exposure on revenue by up to 20%. We predict climate change will significantly reduce yield, quality, and revenue by century's end absent additional adaptation. In the second essay, I investigate how natural resource scarcity affects farmers' decision making. Using a panel of 3,300 irrigated fields in California, I ask whether farmers respond to water scarcity by changing whether they plant, what they plant and how they produce. Novel data provide evidence of the mechanisms by which growers use water more efficiently - insights unattainable in publicly available or survey data. I find that during a water scarce year, growers are more likely to plant earlier, plant fast-maturing varieties, and preferentially plant fields equipped with drip irrigation rather than less water-efficient technologies. Water access drives how growers conserve water: growers with low-priority access rely on more costly margins, such as fallowing or changing growing practices in ways that reduce revenue per acre. This demonstrates that agricultural producers engage in water-saving practices more than what has been previously found and that these practices help growers avoid fallowing, a much more costly response. The first and second essays use proprietary data on California's $1 billion processing tomato industry, which produces nearly one-third of the world's processing tomatoes. Tomatoes are the second-most consumed vegetable in the United States and contain nutrients that are important to human health, but often under consumed. These novel data are collected by a large tomato processor for the purposes of contracting and payment, and include field-level quality, yield, price, and grower practices for many independent farmers operating in California. The third essay returns to the relationship between quality, weather, and climate for a different specialty crop product: wine. Wine is the most differentiated of all agricultural products, with much of the differentiation based on the combination of wine grape varieties and “terroir”: the natural environment in which the grapes are grown. The objective of this study is analyze the complex relationship between collective reputation, climate, weather, and price premia and quality for varietal wine in California. We find temperatures warmer than the regional norm had negative effects on both Cabernet Sauvignon and Chardonnay wine prices and scores. We also find that wines from premier regions are less influenced by deviations in temperature from regional climate. This supports the notion that producers of higher-value wines intervene more to mitigate the negative effects of weather. Quality matters for all agricultural producers but some more than others. Prices of processing tomatoes vary plus or minus 20% in my sample whereas wine grape prices vary by a factor of 50, even for the same variety and vintage produced in the same region. For processing tomatoes, we benefit from detailed and precisely measured data on quality attributes and how they affect grower revenue. Quality variation is arguably more important for wine grapes and wine but also more complex, which makes it more difficult to cleanly link weather effects to attributes that affect prices of grapes and wine. Rather than direct observations of quality attributes, we use expert ratings and recommended retail prices as indicators of wine and wine grape quality. Both papers contribute to our understanding of how weather and climate influence agricultural product quality. Each of these three papers contributes to our understanding of how economic agents are affected by and respond to weather, climate, and climate change. Most of what we know about agricultural production in the face of climate change comes from research on yields of staple crop. This dissertation contributes by analyzing specialty crops that are understudied despite making up 40% of the total value of U.S. crops. Taken together, the research in this dissertation highlights potential harm from a hotter and drier climate absent adaptation.